Compliance ignorance in recruitment: do you know what you’re really risking?

In reflecting on my 30th anniversary in the recruitment industry I was thinking about what’s very different and what’s broadly the same now, compared to the late 1980s and early 1990s.

One of the less obvious areas, but highly important, is risk and compliance.

I worked at four different recruitment companies across my recruitment career and the level and frequency of training on risk awareness and compliance was minimal.

As a temp recruiter I received full training on the award that was relevant to the temps I was employing. I was aware of The Privacy Act (1988) and broadly how it applied to my job but I can’t recall attending any formal external training on that legislation or Anti-discrimination law either.

My experience would have been entirely normal for any recruiter who started their career more than twenty years ago. Ignorance and apathy was the order of the day, mostly, I would posit, because awareness of the relevant laws was low, prosecutions were rare and publicity, in the pre-social media days, for the few prosecutions that were successful was minimal.

As a specific example the requirement for working holiday makers (‘backpackers’) on visa sub-class 417 to not work for any employer for more than six months was routinely ignored for the simple reason that there appeared to be no enforcement of that visa condition. For years I had never heard of a backpacker being even warned about the breach of this visa condition. This started to change in the late 1990s. Until Department of Immigration upped its policing of the visa conditions I had happily employed backpackers for as long as they wanted to work, up to their visa’s expiry date.

These days things are very, very different for recruiters and their employers.

This has been given recent prominence by the action launched by law firm Adero Law in the Federal Court at the end of 2018 claiming Hays and Stellar Recruitment had both underpaid thousands of workers leave and other entitlements for years.

Hays is facing claims that it has been underpaying up to 1,500 workers since at least 2014 because it engaged them as casuals rather than as permanent employees. Its chief client was Australian coal producer BHP Mitsubishi Alliance.

Under the Fair Work Commission’s Black Coal Industry Award, the use of casual employees is prohibited except through an enterprise agreement. Hays did not negotiate an enterprise agreement that would have allowed it to legally use casual workers.

Hays sought an enterprise agreement after Adero had flagged that it was investigating the recruitment firm, but workers voted the agreement down late last year.

Stellar Recruitment is also facing an estimated AUD 10 million to AUD 15 million in alleged underpayments for similar reasons in a class action representing 500 workers. The company also had no enterprise agreement.

This action followed the successful claim made by truck driver Paul Skene, represented by Adero Law, against labour hire company Workpac in 2018. The claim was for the misclassification of Skene’s employment status as casual. Skene asserted he was working, and being employed, as if he was a permanent employee and as such had not been paid his full entitlements for his tenure (two years). The Federal Court ruled that Skene should be paid $21,054.69 in holiday pay he had not received and a further $6735.03 in interest in lieu of the late payment.

Last week Adero Law filed an $84 million class action against Workpac over claims it had underpaid ‘regular’ casual workers annual leave and other entitlements.

I make no judgement about the actions of the companies mentioned. The claims are before the courts and due process is now underway to reach an outcome in each claim.

What is indisputable is that we are now in an era for our industry that is characterised by:

more legislation aimed at hiring practises and workplace behaviour,

greater resources devoted to auditing employer compliance,

law firms with a larger focus on, and appetite for, running no-win-no-fee class actions and other claims

niche and mainstream media that are quick to write, publish and promote stories that fit the unfair/bad-employer-mistreated/victimised-employee narrative that maximises the likelihood of click throughs and readership (of course there are just as many cases that fit the opposite narrative but it will generally take a case as high profile as the Myer/Flanagan resume fraud to gain significant exposure)

Given this trend I suggest all employers take note of recent stories in the media that provide salutatory warnings of the pitfalls that can befall the ignorant, careless, unskilled or thoughtless, even when actions are carried out with good intentions.

Criminal convictions: on 22 January 2019 industry news service ShortList reported (all ShortList links are subscriber access) that an employer has paid a candidate $2,500 compensation and revised its recruitment processes after the Australian Human Rights Commission found it had unlawfully discriminated on the basis of a criminal conviction.

My comment: A criminal conviction is a valid reason for not progressing a candidate for a role as long as the conviction is relevant to the inherent requirements of the role (eg a fraud conviction would be a valid reason for not considering a candidate who would be working in an accounting role. You can access a free pdf on how to treat a criminal conviction in a recruitment process here)

Reference checking: on 19 January 2019 ShortList reported that the NSW Independent Commission Against Corruption noted in a report on the case of a Hays contractor who funnelled more than $500k in payments to his own accounts over five months: “The questionable validity of the reference check calls into question the methodology that Hays used to conduct it.”

The recruiter used a mobile number provided by the contractor – an approach that “does not constitute better practice in conducting referee checks, but which nonetheless wasn’t inconsistent with the SCM0007 scheme’s requirements.

“One better practice element includes contacting the switchboard or HR department of the organisation(s) to which the reference applies to verify the relationship between the referee and the applicant,” the report says.

The ICAC report concluded by making 15 recommendations to assist in preventing corruption in the recruitment process and the engagement of both direct and labour-hire supplied contractors.

My comment: Hays was not found to be corrupt or negligent; nor should they have been. The department in question; NSW Department of Finance, Services and Innovation (DFSI), was less than rigorous in following its own contract requirements. Nevertheless Hays has been dragged through the mud in this case and I am it provides yet another lesson to recruiters that even if the client is ambivalent about thorough reference checks being completed you should still undertake these checks in order to protect your own reputation, as much as you should do them for the completeness of the recruitment process. It’s easy to find another candidate or make another placement compared to how hard it is to restore your reputation if you shirk reference checks.

Terminating temps and contractors: on 4 December 2018 ShortList reported that recruitment agency Spinifex had lost appeal against an “entirely unacceptable” dismissal. The bench upheld Senior Deputy President Jonathan Hamberger‘s finding that Spinifex had no valid reason for dismissing the employee who had been on assignment through Spinifex at the Department of Justice for seven months. Spinifex ended her assignment after the DOJ raised concerns about her customer service, but didn’t inform her of the reasons.

My comment: A temp or contractor may sign a contract that specifies that they can be terminated from an assignment with little or no notice. Such a contract does not invalidate unfair dismissal laws or any other relevant laws concerning employee rights in the workplace. All recruiters responsible for temp and contract placements should thoroughly understand their obligations under workplaces laws.

These are just three issues that I have highlighted from recent cases.

Three other areas of risk include:

Misleading and deceptive conduct: The Australian Competition and Consumer Commission (ACCC) polices this aspect of business behaviour and the actions of recruiters squarely fall into their remit. Actions such as:

the referee, candidate or consultant provides information that is incomplete, inaccurate or not current

the referee, candidate or consultant provides information that creates a false impression

a consultant makes a false, inaccurate or misleading statement about the extent of the inquiries that he/she has undertaken (or will undertake) in selecting candidates

Candidate right to work in Australia: The Department of Immigration (DOI) have the capacity to issue infringement notices of $15,300 (escalating up to $76,500) without proving negligence, fault or intention to businesses employing workers in breach of visa conditions or work rights. This can apply to cases where a worker with incorrect working rights has been merely referred for work; they don’t have to actually be employed for a breach to have occurred. This breach can be levied at both the potential employer and the referrer (eg recruitment agency).

Occupational Health & Safety: last week ShortList reported that most (85%) recruitment providers demonstrate good awareness and practices around candidate safety inductions, but a notable minority (15%) are not up to standard, according to Certex International managing director Dianne Gibert. The reasons Gibert stated for the 15% of laggards include having foreign ownership, being start-ups or they simply didn’t ‘get it’.

I was lucky that some of my youthful indiscretions or ignorance as a fledgling recruiter did not come back to bite me legally, financially or reputation-wise.

I would hope the recent bout of high profile cases impacting our industry have given owners, leaders and recruiters a shot across the bow in plenty of time for any shortcomings to be identified and addressed.

Ignorance is no excuse – you’ve been warned.

Note:Compliance resources to assist you in understanding and fulfilling your obligations as an employer can be found at APSCo, RCSA, WorkPro, or Certex.

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About Ross

Ross is a high performance recruitment coach and recruitment industry blogger and commentator.

Since 2003 Ross has run his own business, providing a range of services to the recruitment industry in Australia and New Zealand.

" Ross worked for me over many years in an environment that demanded the best and stretched people to the utmost –and he excelled during that time. Many people, at all levels in our industry, could learn from Ross Clennett. "